Absorption rising, vacancies down among industrial properties
Absorption of industrial real estate — when newly constructed or previously vacant space is occupied during a given period — in Montreal has reached its highest level in more than a decade, according to Luciano D’Iorio, the managing director for Quebec at Cushman & Wakefield, an international real estate firm. Almost 1.8 million square feet of industrial property in Montreal was absorbed during the second quarter of 2017, according to Cushman & Wakefield. That’s the highest absorption rate since 2006, D’Iorio said.
“It’s good news and it’s showing a strong industrial market in StLaurent and the West Island and the East End,” he said. “We’ve gone through years of famine, where À Louer signs were very prominent.”
The vacancy rate for industrial property in Montreal was 6.4 per cent between April 1 and June 30, according to Cushman & Wakefield. That’s down from 6.7 per cent during the previous quarter and 7.5 per cent during the equivalent quarter in 2016. It’s down even further from the second quarter of 2015, when it was at 9.6 per cent.
The growth is being driven by a mixture of increased demand and tightening supply.
“The inventory itself has changed,” he said.
“Those older industrial buildings, the Chabanel area and the Mile-End, Mile-Ex, those buildings have converted to either office or condo, so that space has been taken off our industrial statistics.”
That diminishing supply is starting to have an effect on prices.
The average net asking rent for industrial properties in Montreal rose to $6.05 a square foot during the second quarter of 2017, up from $6.01 during the previous quarter and up from $5.76 during the second quarter of last year.
Demand is also increasing, as businesses want to be close to market. At least some of that is a result of the growth of e-commerce — online sellers need warehouse space to store goods to quickly fulfil orders. “They want to be close to their customers, being able to deliver quickly and effectively,” D’Iorio said.
It’s a sign of a stronger economy, he said. While there is some new industrial construction, options are limited. “There’s new industrial construction, our problem is land, on the island, there’s not that much land left,” D’Iorio said.